Logistics costs, electricity prices and port tariffs are on the agenda at the Southern African Metals and Engineering Indaba in Sandton this week.

Transnet and Eskom chief executive officers, Siyabonga Gama and Phakamani Hadebe, will be speaking on these issues at a plenary session at the indaba, to be held at the Industrial Development Corporation from 20 to 21 September.

According to Steel and Engineering Industries Federation of Southern Africa (Seifsa) economist Marique Kruger, several companies in the primary, secondary and tertiary manufacturing sectors rely on electricity for productive processes while logistics efficiency is crucial to keeping operational costs down.

“Electricity costs represent, on average, 3% of intermediary inputs for the entire metals and engineering sector and for some basic metals companies such as smelters and foundries, this can be a significant portion of their input costs, thereby restricting future production capacity,” she said.

Coal and energy costs represent up to 42% of production costs in the steel industry and high electricity costs can slow down production and growth, increase product prices and reduce exports and export competitiveness in an already struggling sector of the economy.

Seifsa CEO, Kaizer Nyatsumba, noted that there was a need to improve logistics efficiencies in the industry in order to improve on both productivity and competitiveness as the use of third party logistics to assist in the handling of a product added to logistics costs.

“There is also a need to consider re-instating rail subsidies for containers destined for export as well as improving efficiencies relating to on-time delivery and turnaround time,” he added. “This is the reason we decided to have a session specifically dedicated to addressing the challenges that hinder our sector from being internationally competitive.”